Automatic Renewal and Unfair Termination: Case Summary

Authors: Ann Bugeja & Christine Borg Millo

The judgement Brian Schembri v National Orchestra Limited, decided by the First Hall, Civil Court by Onor Imhallef Dr. Giovanni M Grixti, on the 30th of September 2024 tackled the situation of the termination of an employment contract following the option of its automatic renewal. Where the duration of a fixed term contract lapses and may be automatically renewed, the employer has a duty to abide by the original terms stipulated in the original employment contract. In this case, the issue namely arose when the defendant company  decided on new terms of employment, to which the employee disagreed with, therefore bringing about the fallout of the employment relationship which existed among the parties.

Facts of the Case and Court Deliberations

The plaintiff, Brian Schembri, was employed by the defendant company National Orchestra Limited. They had an employment contract which held that the plaintiff was to be employed for a period of three (3) years starting from 1st of January 2013 until the 31st of December 2016. At this stage, Sigmund Mifsud, who was the Chairman and Chief Executive Officer of the defendant company, attempted to convince the plaintiff to take on the role of Principal Conductor and Artistic Director of Malta Philharmonic Orchestra. After he expressed some doubt, the plaintiff accepted, and the defendant company drafted his employment contract.

A clause in his contract stipulated that the fixed term of the contract would be “automatically renewable” following its expiry. Four (4) days prior to the lapse of the contract, the defendant company informed the plaintiff that “the Board of Directors would like to renew the duration by a further three (3) years”. Subsequently, the defendant company was under the impression that a new employment contract would be entered into for the ensuing three (3) year, with amendments to reflect the advancement in their relationship.

However, following this, the plaintiff felt as if the new conditions were less favourable to him than those agreed upon in the original employment contract. This was since the terms would be of a detriment to his position within the Orchestra and moreover would deviate from his original role as conductor of the Orchestra. Mainly, the defendant company wanted to change the plaintiff’s services from one of employment to self-employed. Secondly, they wished to remove the role of artistic director from his employment status.  Furthermore, the plaintiff claimed that with the new employment contract in place, he would have to lead ten (10) concerts however be compensated for only five (5) of them.

For these reasons, the plaintiff did not accept to sign the contract with the new terms and conditions. Hence, Mr. Mifsud gave instructions to the management not to involve him in any artistic decisions related to the MPO. After some time, they instead offered the plaintiff three (3) concerts, and thus he felt as though he lost his authority that came with the role. Overall, he was not being included in making decisions, and when he was, his decisions were being overridden.

After several deliberations between the parties to come to a settlement on the new amendments, the defendant company decided to abruptly terminate the original contract of employment. This was done on the basis of it claiming that the plaintiff refused to sign and agree on the new conditions and that he abandoned his duties within the Orchestra.

The crux of the issue was essentially whether the plaintiff was entitled to the penalty payment which the contract catered for after termination of his fixed term contract. The Court emphasised that there was no need for a new employment contract to be drafted when the original contract would be renewed automatically. The Court also acknowledged that after the original contract was automatically extended for a further three (3) years, the defendant company did everything in its power to place the plaintiff in a position where he could not honour his obligations.

Concluding remarks

The defendant company terminated the employment contract of the employee before they sufficiently proved that the employee had in fact abandoned his duties. In fact, following the decision on termination, the company did not respect the penalty payment of three (3) years’ salary which was outlined in the original employment contract.  Based on this reasoning, the Court rejected the defendant company’s counterclaims, ordering them to pay the plaintiff pay one hundred and sixty-eight thousand, four hundred and thirty-one Euro and ninety-six cents (€168,431.96) which represented three (3) years’ worth of salary to honour the terms agreed to in the original contract of employment.